Beginning 1 month from now, Thaxton Mechanical Products will set aside $1500 per month for possibly replacing its corrosion-resistant diaphragm pumps whenever it becomes necessary. The replacement isn’t needed for 3 years. How much will the company have available if the hoped-for rate of return of 18% per year is achieved?
What will be an ideal response?
Move deposit to end of annual compounding period; find F
F = 1500(12)(F/A,18%,3)
= 18,000(3.5724)
= $64,303
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